Quarterly report pursuant to Section 13 or 15(d)

2. Basis of Presentation (Policies)

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2. Basis of Presentation (Policies)
9 Months Ended
Sep. 30, 2016
Accounting Policies [Abstract]  
Liquidity: Going Concern

Liquidity; Going Concern

 

The Company has historically incurred significant losses primarily due to its past efforts to fund direct methanol fuel cell product development and commercialization programs, and had an accumulated deficit of approximately $120.8 million and working capital of approximately $1.3 million at September 30, 2016. As of September 30, 2016, we had no debt and $20 thousand in commitments for capital expenditures. 

 

Based on the Company’s projected cash requirements for operations and capital expenditures, its available cash of approximately $886 thousand and our projected cash flows pursuant to management’s plan, management believes it will have adequate resources to fund operations and capital expenditures for the near term. If cash generated from operations is insufficient to satisfy operational working capital and capital expenditure requirements, the Company may be required to obtain credit facilities to fund these initiatives. Any additional financing, if required, may not be available to us on acceptable terms or at all. 

 

The Company’s financial statements have been prepared assuming the Company will continue as a going concern, which assumes the realization of assets and the satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. If the going concern basis were not appropriate for these financial statements, adjustments would be necessary in the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used. 

 

The Company’s history of operating cash flow deficits may raise doubt about its ability to continue as a going concern and its continued existence could be dependent upon several factors, including its ability to raise revenue levels and control costs to generate positive cash flows and/or to obtain credit facilities. Obtaining credit facilities may be more difficult as a result of limited access to equity markets and the tightening of credit markets. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount of or classification of liabilities that might be necessary as a result of this uncertainty. 

 

The Company believes that the current lack of liquidity and “going concern” opinion with respect to its audited financial

statements for the year ended December 31, 2015 resulted primarily from delays in entering into a new agreement with the U.S. Air Force (as discussed in our Annual Report on Form-K for the year ended December 31, 2015 in Item 7: “Management’s Discussion and Analysis of Financial Condition and Results of Operations”) and in an expected product order from Asia that was not received, as well as the Company’s cancellation of its existing lines of credit on March 24, 2016, as further discussed in Item 7: “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in the Annual Report and this Form 10-Q. As previously reported, the Company entered into the long-anticipated contract with the U.S. Air Force on July 1, 2016, and started receiving orders thereunder soon thereafter.

 

On October 21, 2016, the Company entered into a Securities Purchase Agreement with Brookstone Partners Acquisition XXIV, LLC (Brookstone), pursuant to which on such date the Company issued and sold 3,750,000 shares of its common stock to Brookstone for an aggregate of $2,737,500. See Note 13 Subsequent Events and the Company’s Form 8-K filed on October 21, 2016 for more details related to this transaction.

Basis of Presentation

Basis of Presentation

In the opinion of management, the Company’s condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the periods presented in accordance with United States of America Generally Accepted Accounting Principles (U.S. GAAP) and with the instructions to Form 10-Q in Article 10 of the Securities and Exchange Commission’s (SEC) Regulation S-X.  The results of operations for the interim periods presented are not necessarily indicative of results for the full year.

 

Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

 

The information presented in the accompanying condensed consolidated balance sheet as of December 31, 2015 has been derived from the Company’s audited consolidated financial statements. All other information has been derived from the Company’s unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2016 and September 30, 2015.

Principles of Consolidation

Principles of Consolidation

 

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, MTI Instruments. All intercompany balances and transactions are eliminated in consolidation.

 

The Company records its investment in MeOH Power, Inc. using the equity method of accounting. The fair value of the Company’s interest in MeOH Power, Inc. has been determined to be $0 as of September 30, 2016 and December 31, 2015, based on MeOH Power, Inc.’s net position and expected cash flows. As of September 30, 2016, the Company retained its ownership of approximately 47.5% of MeOH Power, Inc.’s outstanding common stock, or 75,049,937 shares, and 56.0% of the common stock and warrants issued, which includes 31,904,136 warrants outstanding.